OptionsHouse

Options Trading News

November 14, 2012  Wed 11:10 AM CT

USG: SEE CHART GET CHAIN FIND STRATEGIES
One trader apparently thinks that the run is over in USG.

optionMONSTER's Depth Charge tracking program detected the purchase of about 4,000 December 26 puts for $2.05 to $2.15. Volume was more than 20 times open interest at the strike, so this is clearly a new position.

The trader has now locked in a $26 selling price on drywall maker, no matter how low the shares go. That provides inverse leverage to the stock price, so the put buyer is effectively short the name. (See our Education section for more on why buying puts often makes more sense than selling shares.)

USG is down 0.63 percent to $25.31 in midday trading. The stock more than quadrupled in value between October 2011 and November 2012 as investors priced in a stronger North American housing market, but it has been falling since.

The unusual thing about today's activity is that the investor is using in-the-money contracts, which more closely track drops in the stock price. This suggests that he or she is a speculative bear rather than a shareholder looking to hedge a long position.

Puts outnumber calls by 9 to 1 in the name so far in the session, according to the Depth Charge.
Share this article with your friends


Related Stories

USG

Call buyers come back for more in USG

April 19, 2016

The drywall maker, already up 39 percent in the last three months, drew upside option activity yesterday for the second time in three sessions.

USG

Large investor doubles down on USG

April 14, 2016

The drywall maker is scheduled to announce quarterly results next week, and one large investor is rolling a bullish position higher.

OptionsHouse

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Education & Strategy

Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

View more education articles »